BlackRock, the asset manager behind the iShares suite of exchange-traded funds, has released their Global ETP Landscape Report for November. The paper highlights continued net gathering of assets among the global ETP sector during the month, spurred on by significant demand for US equity ETFs. Meanwhile, a substantial slowdown in net inflows for fixed income ETFs and outflows in emerging market equity ETFs were a drag on global gathering performance.
The BlackRock Global ETP Landscape Report indicated that ETFs investing in US equities saw 21.4bn in net inflows, the largest experienced by the region this year.
Ursula Marchioni, Chief Strategist EMEA, iShares commented: “Global ETP flows remain on a record path for 2015. In November, flows were mostly driven – once again – by central banks’ diverging policies. As the month progressed, the US Federal Reserve looked increasingly likely to lift rates at their December meeting, and markets expected the European Central Bank (ECB) to add to their stimulus program. As a result, we saw strong flows into US and developed equity funds, while US treasuries were out of favour. After the rebound in October, the slowdown in China last month weighed again on emerging markets equities, which were equally not helped by the prospects of the nearing Fed decision.”
ETPs received global net inflows of $28.2bn during November, bringing year-to-date (YTD) flows to $302.4bn, ahead of last year’s YTD figure of $283.9bn. It appears to be a close finish for the industry to surpass the previous full-year record of $345.4bn which was set in 2014.
US-listed ETPs led with $26.0bn in net new assets during the month. Total net inflows for European-listed ETPs amounted to $3.2bn for the month and the YTD figure of $73.2bn is already surpassing previous full-year records for the region.
Exchange-traded funds offering US equity exposure experienced their largest net gatherings of the year on the back of a more favourable economic outlook in the most recent Fed minutes; these ETFs collected $21.4bn during November. Investors showed a clear preference for large cap equity exposure (accounting for roughly half of net inflows) while ETFs targeting cyclical sectors such as technology (+2.1bn) and financials (+1.4bn) also played notable roles.
Broad developed market equity funds continued to exhibit strong demand, attracting $6.4bn last month. Despite promises from ECB President Mario Draghi that “we will do what we must to raise inflation as quickly as possible,” pan-European equity funds netted a historically modest $1.4bn in new assets.
BlackRock believes that regardless of the unusual flow pattern for November pertaining to European equities, net gatherings in the sector will rise again as market participants gain trust in the ECB’s policy stance. “While Eurozone equities saw the lion’s share of developed markets flows this year, last month investors turned to opportunities in other markets rather than to the consensus home bias. We believe this could well change with earnings for the region continuing to deliver, and market sentiment continues to rely on the ECB easing stance,” added Marchioni.
Emerging market equity ETFs shed $2.5bn in net assets during November owing mainly to investor’s desire to avoid the impact of further volatility in China’s markets; China equity ETFs experienced net outflows of $2bn.
Turning to fixed income ETFs, the sector experienced a reversal of fortune after strong inflows during October to record net outflows of $129m during November. Broad fixed income ETFs managed to gain $3.5bn in net new assets while investors showed interest in investment grade corporate bond ETFs (+1.2bn) and high yield corporate bond ETFs (+$0.4bn); however, the increased possibility of a December rate hike by the Federal Reserve saw investors abandon US Treasuries ETFs to the tune of $4.5bn in net outflows.
In the commodities space, a modest increase in net new assets of $800m was recorded during November. This consisted primarily of increased demand for energy-based ETPs (+$2.1bn) being offset by significant outflows to gold ETPs (-$1.5bn). “November also saw increasing demand for energy-based commodity funds. Speculation around potential cuts in oil production from large OPEC members could continue to drive flows in this space in the next months,” said Marchioni.